Tax rules surrounding rentable properties need to be urgently clarified as they are hampering the installation of high efficiency boilers – landlords have claimed.
They argue existing definitions of what is tax deductible fail to take into account the impact on energy efficiency of the latest condensing boilers.
At the moment Her Majesty’s Revenue and Customs (HMRC) says the replacement of fixtures that constitute an ‘improvement’ – including boilers - is not tax deductible as it would add to the
capital value of the property.
This includes the installation of condensing boilers even though replacing single glazed windows with double glazing windows – which was formerly viewed as an ‘improvement’ - is now given tax breaks as it improves “thermal insulation”.
Condensing boilers should count as a 'replacement'
Elizabeth Brogan, senior policy officer at the National Landlords Association, said: “There is an urgent need for clarification from the Inland Revenue about the nature of works which can be deducted against tax.
“Since all new boilers are now supposed to be condensing boilers we would suggest that these
should no longer count as an improvement but a replacement.”
Clear guidance needed on heating improvements
HMRC declined to comment on the issue this week after being approached by H&V News, but expert landlord David Lawrenson, who highlighted the issue on his website
www.lettingfocus.com, said landlords needed clear guidance.
He said at the moment it was difficult to understand what items were covered by ‘wear and tear’ allowances for furnished flats and what could be claimed as valid expense.
He said: “Condensing boilers are an improvement and like thermal insulation requirements they are mandatory.
“It would be helpful if HMRC could confirm the costs are deductible because the current confusion means when a landlord is faced with the cost of replacing an old boiler, he is more likely to try to keep it going than to replace it, especially as repair costs can also be claimed as a valid running cost.
“It would be even better if HMRC could announce they will always allow condensing boilers as a deduction when replacing existing boilers. And even better than that would be if condensing boilers were included in the Landlords Energy Saving Allowance (LESA) where the property has not had central heating before.”
More focus on Landlords Energy Saving Allowance (LESA)
Ms Brogan said the incentives issue also needed addressing: “We also agree that incentives should be available to landlords to install modern boilers - whether that is through LESA or WarmFront - which currently does not fund the replacement of boilers in rented property if they are the responsibility of the landlord.
“But even more urgent is the need to publicise the existence of LESA - many landlords do not know that they have a tax incentive to install energy efficiency measures, what it covers or how to claim it.”
As the Government increasingly concentrates on the need to improve the performance of existing buildings and continues consulting on its Heat and Energy Saving Strategy, Mr Lawrenson said it was overlooking a simple way of quickly improving the performance of properties.
As a result he said: “Many landlords will keep an old boiler going for longer than might be best from an environmental point of view.”